NAO urges government not to leave HMRC high and dry on customs platform time bomb

Written by Sam Trendall on 14 July 2017 in News

News

Brexit has massively increased the scale and complexity of ongoing £157m plan to replace ‘ageing technology’

Post-Brexit the number of annual customs declarations HMRC needs to handle is expected to leap from 55 million to 255 million Credit: PA

A National Audit Office report has warned of a growing risk that HMRC’s new customs platform will not be ready in time for the UK’s exit from the European Union, and urged the government to better support the department in delivering what is a highly complex project.

In October 2013, the EU changed various laws related to customs and duty procedures and introduced the Union Customs Code (UCC). Included in the new set of regulations featured in the UCC was a requirement that, by the end of 2020, all communications between the customs authorities of Union member states and firms importing and exporting goods into and from their countries are conducted electronically.

HMRC currently relies on a system for managing customs declarations that is commonly known as CHIEF – Customs Handling of Import and Export Freight. This platform has been in operation for upwards of two decades and runs on “ageing technology”, the report said.

Related content

The NAO added that, following the introduction of the new EU regulations, the department decided that making the necessary upgrades to ensure CHIEF was fit for purpose “would be too expensive and would cause significant delay in meeting the requirements of the UCC”.

At this point, HMRC decided to pursue the creation and implementation of a new system, dubbed the Customs Declaration Service (CDS). Since then, the department “has made progress in designing and developing” CDS, the report said.

“[HMRC] has prepared and updated its business case and procured major suppliers,” the NAO added. “It has also designed the overall service model and shared technical specifications with third-party software suppliers and intermediaries to allow them to develop the tools they will need to interact with the new system.”

But, at a stroke, the UK’s vote to leave the European Union last year massively increased the scale and complexity of the project. What is more, it brought forward by the better part of two years the date by which the CDS system needs to be fully operational.

The CHIEF system currently needs to process about 55 million customs declarations each year – comfortably within the 100 million the it is reportedly capable of handling. The initial plans for its successor laid out by HMRC included a budget of £157m, which the department estimated could fund a system geared up to process 150 million declarations each year.

But, such is the volume of business that the UK currently does with fellow EU member states, it is anticipated that, post-Brexit, HMRC will potentially need to deal with an extra 200 million declarations each year. The projected total number – 255 million – is not only way in advance of what the CDS, as originally conceived, would be able to handle, but represents an almost fivefold increase on the current figure of 55 million.

And, with article 50 triggered earlier this year, a new customs system needs to up and running smoothly by March 2019. The CDS project is currently slated for completion in January 2019, leaving very little margin for error.

The report concluded that HMRC needs help and support from the wider central government set-up. The current administration was urged to ask itself what more it could do to ensure the department is able to successfully deliver CDS.

What is not reasonable is leaving HMRC to decide alone what mitigating actions are needed

“What is clear is that the timeline for completing the CDS programme under its current scope allows very little flexibility should the programme overrun or unexpected problems occur,” it said.

“While HMRC is working to manage the risks and issues identified in this report, and is developing contingency plans, the whole of government must choose now whether it needs to do more to help HMRC to mitigate the risk of the system being needed, but not ready in time. For example, by prioritising funding and resources to speed up progress with the programme, and by supporting HMRC to develop contingency options.”

The report added: “What is not reasonable is leaving HMRC to decide alone what mitigating actions are needed. Government as a whole must decide what priority it attaches to the CDS programme, and whether any extra costs linked to having a suitable customs system in place by early 2019 are an insurance premium worth paying.”